HAC Tax-Exempt Organization Accounting 3

Question 1

A tax-exempt hospital leases office space to a for-profit physician group at fair market value. The rental income is:

Accepted Answer

Exempt from UBIT as passive rental income

Answer

Passive rental income from real property is generally excluded from unrelated business taxable income under IRC Section 512(b)(3).

Question 2

Under the intermediate sanctions rules (IRC Section 4958), an 'excess benefit transaction' occurs when:

Accepted Answer

A disqualified person receives compensation exceeding fair market value

Answer

An excess benefit transaction occurs when a tax-exempt organization provides an economic benefit to a disqualified person that exceeds the value of services provided.

Question 3

Which of the following is considered a 'disqualified person' under IRC Section 4958 intermediate sanctions rules?

Accepted Answer

The chief executive officer of the organization

Answer

Disqualified persons include those in a position to exercise substantial influence over the organization's affairs, such as the CEO.

Question 4

A healthcare nonprofit's endowment is invested in publicly traded stocks. The unrealized gains at year-end should be reported on the Statement of Financial Position as:

Accepted Answer

An increase in net assets

Answer

Under ASC 958, unrealized gains on investments are reported as changes in net assets in the period they occur, increasing total net assets on the balance sheet.

Question 5

A tax-exempt hospital provides $2 million in charity care. For Form 990 Schedule H reporting, charity care is measured at:

Accepted Answer

Cost of providing the care

Answer

For Schedule H community benefit reporting, charity care is measured at the cost of providing care, not the forgiven charges.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Tax-Exempt Organization Accounting 3